Grayson writes: "Here is what I think. Moody's, like the rest of Wall Street, very much wants the Bush tax breaks for the rich extended. If we do jump off the so-called 'fiscal cliff,' then the Bush tax breaks end. So Moody's is playing the downgrade card, fear-mongering, to try to prevent that. That's actually the generous interpretation. It's either that, or Moody's is living in what Aristophanes called 'Cloud Cuckoo Land.'"

Congressional candidate Alan Grayson. (photo: Getty Images)

Moody's: Living in Cloud Cuckoo Land

By Alan Grayson, Reader Supported News

15 September 12

Reader Supported News | Perspective

esterday, Moody's Investor Service said that it might downgrade federal debt because the deficit is in danger of going ... down.

Moody's is one of the "Big Three" credit rating agencies. They are in the business of judging the chance that bonds might go into default. The market generally is of the opinion that U.S. government bonds have essentially no chance of going into default, because they are backed by the "full faith and credit" of the Government (a term that appears in the Constitution). As a result, the federal government generally pays interest rates lower than any private entity pays, and in times of financial crisis, government bonds are viewed as a port in the storm.

Last year witnessed the bizarre spectacle of Standard & Poor's, another credit rating agency, downgrading federal debt because the government almost stopped increasing it. Now obviously, if federal debt stops increasing, then it becomes easier to pay; the government is less likely to go into default. What actually was at stake in the debate over increasing the federal debt limit was this – would the Government go further into debt, or would it stick with what it had?

I don't remember any elected official, in either party, saying that the government should default on the debt that it had. In fact, because the Fourteenth Amendment says that, "The validity of the public debt of the United States ... shall not be questioned," I'm not even sure that defaulting on the debt would be constitutional. If the Government stopped borrowing more money, federal revenue would be more than enough to pay the interest on existing debt. But because we came close to not increasing the debt, S&P downgraded that debt.

I'm not saying that the federal debt limit should not have been increased (although I did vote against raising the debt limit - twice). I am saying that it is strange beyond words that a bond rating agency would downgrade the debt of any entity because it might not increase that debt.]

Yesterday, in a report called "Update for the Outlook of the US Government Debt Rating," Moody's, which is S&P's main competitor, took this illogic a step further. Moody's said that it would maintain a "negative outlook" on US government debt if the so-called "fiscal cliff" occurs. The "fiscal cliff" is the Orwellian propaganda term that refers to spending cuts and tax increases that automatically go into effect at the end of this year, if no bill is passed to change that. According to the Congressional Budget Office, these spending cuts and tax increases would reduce the deficit by $560 billion a year.

Since Barack Obama was sworn into office, we have endured incessant kvetching from certain quarters about the deficit and the debt. Now, if nobody does anything, that deficit drops by $560 billion a year, less than four months from now. And Moody's somehow thinks that that's a bad thing for bondholders?

It's a bad thing for the unemployed; they stand to lose $40 billion in unemployment insurance. But a bad thing for federal bondholders? No.

Here is what I think. Moody's, like the rest of Wall Street, very much wants the Bush tax breaks for the rich extended. If we do jump off the so-called "fiscal cliff," then the Bush tax breaks end. So Moody's is playing the downgrade card, fear-mongering, to try to prevent that.

That's actually the generous interpretation. It's either that, or Moody's is living in what Aristophanes called "Cloud Cuckoo Land."

Courage,

Alan Grayson

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> Last year witnessed the bizarre spectacle of Standard & Poor's, another credit rating agency, downgrading federal debt because the government almost stopped increasing it.

What kind of game is this, S&P absolutely did not downgrade the debt because it was going down. What kind of silliness is this.

I hold the Republicans in contempt because they do dishonest things like this, spin stories to their benefit for no earthy reason that have no connection to reality ... I don't like seeing Democrats doing this any better.

You know why both of these entities are squawking, and it is not because we have too little debt, it is because we are mired in debt crisis brought on purposefully by the Republican Bush administration and Democrats refuse to be honest with the people about what is going on just like they failed during the war, but going along because of the war was not as destructive as this debt is going to be to Americans starting in the very near future. We have only seen a little bit of how things can go wrong when we go to far out on a branch, be it war, the economy, trying to increase profits by scewing Americans.

Actually there's a counterpart on the consumer side. If you pay off a lender, retailer, etc. don't cancel your account.

Why? If a person has several lines of credit and owes a balance on each of them, then pays off one of his lenders and instructs that creditor to permanently close the account, whether the borrower knows it or not he is also closing out that line of credit. So his credit rating may be downgraded because his total available credit has now been reduced vs. his total indebtedness.

So whether it's a consumer or business credit rating service, if you play their game, you have to first put aside common sense.

Moody's is just one aspect of the rigged, unrealistic and incompetent credit system. I mean, we of the submerged many are stuck with Experian, Trans-Union and Equifax, who's very names are used as some holy grail of your credit worthiness but are lousy with incompetence and corruption, and are almost impossible to deal with.The whole system is contemptible and as usual, Mr. Grayson is one of the few who even addresses it.

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